Is Samsung preparing to split in two?
Samsung's fund management company has reportedly advised the tech giant it needs to increase payouts
Samsung could be prepping to split in two in order to increase payouts, new sources are claiming.
According to South Korean news outlet Seoul Economic Daily, US fund Elliot Management, which owns 0.6% of Samsung, has told the company it needs to split in two to maximise payouts. Half of the company would become a holding company, while the other half would be the operating arm.
This means Samsung would be able to pay out an estimated 30 trillion won (20.6 billion) in a special dividend, maximising the company's investment. Other suggestions from the company include appointing independent directors and returning 75% free cash flow to investors.
Samsung is apparently due to make an announcement on Tuesday regarding its plans, although whether the South Korean company will release full details or just how it plans to change its fortunes remains to be seen.
"Even if Samsung Electronics does not comment on specifics such as the timing of a split ... the firm will at least say it will implement ownership structure changes in a reasonable manner," HI Investment said in a report on Monday.
Splitting the company could also help the founders of Samsung Group make more money out of the company at a particularly turbulent time, following the recall of its flagship Galaxy Note 7 phablet.
"It's difficult to argue with the logic of Elliott's proposals," David Smith, head of corporate governance at Aberdeen Asset Management Asia, told Reuters, "A simpler structure is certainly preferable, and yes most would agree they can afford to pay out more.
"What is important is that these changes should benefit all involved, including family, group, and minority shareholders," he said.
The essential guide to cloud-based backup and disaster recovery
Support business continuity by building a holistic emergency planDownload now
Trends in modern data protection
A comprehensive view of the data protection landscapeDownload now
How do vulnerabilities get into software?
90% of security incidents result from exploits against defects in softwareDownload now
Delivering the future of work - now
The CIO’s guide to building the unified digital workspace for today’s hybrid and multi-cloud strategies.Download now